WASHINGTON -- This question circulated for weeks in financial circles: Who will be Federal Reserve Chairman Alan Greenspan's "enforcer" when William McDonough is gone? The answer is nobody. That became clear June 25 as the Federal Open Market Committee (FOMC) met without McDonough, retired as president of the New York Federal Reserve Bank. Prudent Fed-watchers called the result a "disaster" -- posing a threat to President Bush's re-election.

Greenspan had prepared Wall Street for a reduction in the federal funds (inter-bank lending) rate from 1.25 percent to .75 percent -- dropping 50 basis points. Instead, the FOMC astounded the financial world by cutting half that much -- 25 basis points, down to 1 percent. Without McDonough's presence, a passive Greenspan submitted to the powerful Fed staff. The immediate consequences were opposite to what the central bank intended. The stock market fell and long-term interest rates rose.

Longer-term consequences could be far worse. With the Federal Reserve's credibility shattered, investors might fear future central bank tightening. Higher bond rates discourage corporate investment, which has not responded vigorously to the Bush tax cuts. That foretells continuing low growth of 2.5 to 3 percent, and continued loss of jobs. Those prospects should terrify the president's re-election team.

Greenspan, the most widely celebrated central banker ever, had disappeared the past year in mute confirmation of his inability to alter the economy. In recent weeks, however, admirers saw the old Greenspan at work. He deftly, if belatedly, issued deflation warnings. While pledging not to tighten the moment the economy shows signs of life, he signaled a big interest rate cut in store June 25. "Alan is back!" was the happy exclamation on Wall Street.

Sophisticated investors relied most on what they read in the June 19 Washington Post written by John M. Berry, the premier reporter covering the Fed. He said a 50-basis point cut "seems to be more likely" than 25 basis points. Such is Berry's reputation that this forecast was taken as the authentic voice of the chairman.

There is no way to know exactly what happened June 25 inside the FOMC, which meets secretly and does not keep verbatim minutes. Since then, Fed governors have been even more reclusive than usual. What is known is that the central bank's staff was opposed to the bigger cut, fearing how a .75 percent rate would force them into "non-traditional" monetary operations. Their hand was strengthened by installation as a new Fed governor last August of Donald L. Kohn, who had spent the previous 32 years on the Fed's staff.

That's where the absence of McDonough the enforcer -- or even a reasonable facsimile -- counted. McDonough often stiffened Greenspan's spine in standing up to the Fed's bureaucracy. Although the presidency of the New York Fed is traditionally the second most powerful position in the central bank, no permanent successor to McDonough has been named. A relatively inexperienced board of governors and Greenspan appear to have been rolled over by staffers.

Disappointment among investors was reflected in a quick drop of 100 points at the New York Stock Exchange. More worrisome, however, was its inverted impact on interest rates. The 3.24 percent rate on 10-year bonds soared into the 3.5-3.6 percent range. Thus, a cut of 25 basis points in short-term rates translated into a 25-basis point increase in long-term rates. That is the worst outcome for a central bank in any country at any time -- "an absolute fiasco" in the words of one ex-Fed official.

One former Fed governor called this "the worst single performance that Alan Greenspan has ever had." Former Governor Wayne Angel told me it would be "very, very costly." Yet, as usual, politicians at both ends of Pennsylvania Avenue were silent, seemingly oblivious to what was happening in the Federal Reserve's marble palace a few blocks away.

The consequences could be shattering for George W. Bush. Old aides of his father still contend that the senior Bush's chances for re-election were doomed when Greenspan and the Fed tightened money. A dozen years later, the Greenspan-led Fed may have guaranteed more slow growth and job losses. There is hardly worse news for a president seeking re-election.